New Tech & AIF
According to you, which of the following technologies will impact the AIF industry ?
Survey of 120 professionals from the Luxembourg financial marketplace in November 2016. by SGSS Marketing Department
Nazir Zubairi, CEO at the LHoFT, the Luxembourg House of Financial Technology gave us his views on the natural link that exists in Luxembourg between alternative investment, venture capital, private equity and financial technologies.
In your opinion, what benefits could Fintech bring to the AIF industry?
Significantly better customer and market insights through big data platforms and the use of machine learning can drive productivity in product management and investments. Algorithmic hedge funds have already demonstrated the benefits that a competitive advantage in technology can deliver in the fund management process. The adoption of technology will fundamentally enhance decision-making and ensure competitiveness in the years to come.
What are the three main technologies that will impact the AIF industry, and how will they do so?
Big Data platforms will deliver better insights for decisions and control. Machine learning will drive efficiency and consistency in decision making. Blockchain will drive cost savings in settlement, reconciliation and reporting.
Do you think that Luxembourg is the place where Fintech could be a catalyst for the AIF industry?
Absolutely. Luxembourg has a strong track record of agility and adaptability in its history. Changes in AIFs, driven by technology, are inevitable and I am confident that the Luxembourg industry will choose to take control of these changes rather than let others take the lead and wait for the likely negative impact. The community here has the spirit, the capability and will receive the support they need to ensure their future competitiveness.
Survey of 120 professionals from the Luxembourg financial marketplace in November 2016.
How can Luxembourg be the winner on the AIF European market?
Luxembourg has a very long track record with the administration of UCITS that can be a real asset if we want to build the AIF Brand.
Luxembourg expertise and know-how is definitely recognized all over the fund industry world and has been increasing since the introduction of AIFM as a jurisdiction of choice for alternative/real assets.
Why did you decide to set up a Management Company in Luxembourg?
We set up our Management Company in early 2011 with a UCITS license. however our target was already at that time to be one of the first AIFMs in Luxembourg. Indeed, we saw early the opportunity to transpose the UCITS model that we know well into AIFM, using in particular our Group expertise in Real Assets. Luxembourg was the obvious jurisdiction, given its reputation and track-record as the leading Fund jurisdiction in Europe.
Is the RAIF the expected solution?
The RAIF is a useful addition to the Luxembourg product “toolbox”. Time to market is an essential element for asset managers when choosing a jurisdiction. As the RAIF doesn’t require CSSF approval, the process is now quicker, and is attractive to non-EU managers wanting to use the AIFM passport to enter the EU market. This increases the attraction of Luxembourg as a jurisdiction of choice, competing easily with other unregulated vehicles or offshore funds.
Luxembourg: a place of choice
In the alternative sphere, Luxembourg represents 10.5% of the European market with 585 billion euros. It is the fourth largest European market for the domiciliation of AIFs after Germany, France and the Netherlands. Non-UCITS assets in the Luxembourg market have grown by over 10% a year for the last 10 years (EFAMA statistics).
235 AIF managers have been authorised by the country’s regulator (the CSSF : the Commission de Surveillance du Secteur Financier) and 610 AIFMs have registered with the CSSF, as of May 2017.
Globally speaking, what is the strategy of your clients Asset Managers in terms of AIF in Luxembourg?
Since 2013 Asset managers intend to use as much as they can the AIFM passport whether by using a Management Company in Luxembourg and/or through the creation of Luxembourg-based AIF.
However, those Luxembourg management companies must have the real and appropriate substance for operating in Luxembourg, meaning that they have to perform either risk management activities or portfolio management.
Setting up its own AIFM represents a considerable investment in time and resources, this is the reason why most of small or medium size asset managers do prefer having a third management company in Luxembourg, which is an interesting and cost-effective alternative. In addition it facilitates discussion with the Luxembourg regulator.
The management company has the AIFM license and it can help to speed up the fund approval process.